Today I’ll continue with my series on the Entrepreneur’s Guide To Venture Capital.
Investment By Stage
Despite the common perception that venture capitalists are startup friendly, most of the money invested by VCs go to companies who are beyond the early days of building a business.
This is especially true with today’s economic climate – VCs are now looking more for “sure things” as opposed to taking a risk on a potential high flier.
In the third quarter of 2008, venture capitalists invested $7.1 billion into 907 different deals.
Of that $7.1 billion, only $1.7 billion was invested into seed and early stage companies. The average seed deal was $3.5 million and the average early stage deal was $5.5 million.
Companies who were in the expansion stage received $2.7 billion. The average expansion stage deal was $10.1 million.
Finally, companies who were in the later stage managed to raise $2.8 billion. The average later stage deal totaled $9.8 million.
If you’re in the seed or early stage, there is money available but there is less of it compared to other stages and it is being spread across more companies. Look for venture capitalists who are actively investing into your industry but who have also recently funded startups.
Some VC companies have a greater appetite for risk than others and are willing to take on more seed and early stage companies. A quick look at the press releases of the different VCs will give you an indication as to the types of companies they are investing in.
Matthew Toren is an Award Winning Author, Serial Entrepreneur, and Investor. He Co-Founded YoungEntrepreneur.com along with his brother Adam. Matthew is co-author of the newly released book:Small Business, Big Vision: “Lessons on How to Dominate Your Market from Self-Made Entrepreneurs Who Did it Right” and also co-author of Kidpreneurs.
Great read. You may also want to check out my eccentric thoughts on moving venture capital towards a democratic model. I think people have found the article interesting because I’m a VC myself
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I ended up reading all six parts. Very good stuff. For others like me that come in the middle of the series, you might want to add links to all the parts in each of the posts. I’ll be sending others over to these posts. Thanks!
Great point. Understanding venture capital is critical for entrepreneurs.
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